The best ASX AI stock to invest $500 in right now

With artificial intelligence (AI) rapidly changing the world, it certainly could be a great area to be invested.

The team at Morgans recently stated the following:

Jensen Huang, the rockstar CEO of NVIDIA, recently described Artificial Intelligence (AI) as 'the most transformative technology of the 21st Century' which 'will affect every industry and aspect of our lives.' The CEO of Alphabet, Sundar Pichai, went further, saying AI is 'probably the most important thing humanity has ever worked on.'

Amid all this hyperbole, it can be daunting to know where to start as an investor looking to get exposure to AI. We offer one framework for thinking about this in the Month Ahead for November. We recommend investors start making sense of AI by considering stock opportunities.

But what is the best ASX AI stock to invest in right now? Let's take a look at one stock that analysts at Morgans believe could be a great pick for exposure to this thematic.

The best ASX AI stock for a $500 investment

Morgans is feeling very positive about the outlook of Megaport Ltd (ASX: MP1).

It is a network as a service provider that offers scalable bandwidth for public and private cloud connections, metro ethernet, data centre backhaul, and internet exchange services.

The broker believes that Megaport stands to benefit greatly from increased demand for data networks. Commenting on this side of the AI equation, Morgans said:

AI needs a combination of technical expertise, computing power, data centre space and data. An extremely large amount of data is needed to train an AI agent or LLM. Once the training is complete the AI agent also needs to be given regular up-to-date data in order to remain relevant and useful. This is where traditional data networks (such as telcos like Telstra, TPG Telecom, Superloop and Megaport) come into play.

However, Megaport is the ASX AI stock to buy for this exposure according to Morgans. Its analysts explain:

Traditional telecommunications companies will benefit from the astronomical growth of data around AI. Telstra for instance is building a specialist inter-capital network with a A$1.5bn capital budget to fund this project. However, our preferred exposure is through the more specialised and capital-light Megaport.

Megaport is a global cloud connection network and the leading Network as a Service provider. It operates the largest data centre connection business in the world, connecting to 850 data centres through a fully automated, on-demand telco network. We think it is uniquely placed to help business move data globally and benefit from the growth of data related to both cloud computing and AI.

Big returns

If everything goes to plan, Morgans believes that this ASX AI stock could generate huge returns in 2025.

Its analysts have an add rating and $12.50 price target on Megaport's shares. Based on its current share price of $7.73, this implies potential upside of 62% for investors over the next 12 months. This would turn a $500 investment into just over $800.

The post The best ASX AI stock to invest $500 in right now appeared first on The Motley Fool Australia.

Motley Fool contributor James Mickleboro has positions in Megaport. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Megaport. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2024